Since I've modded my Xbox (about a year ago) I've watched a hell of a lot more anime than I ever would have, I just download big torrents of 10 eps at a time, then stream to my xbox and watch tons of Gungrave, Naruto, One Piece etc. etc... right there on my couch watching on my 51" hdtv instead of parked in front of the stupid pc, where I can get comfy and stretch out with my wife who is now addicted to Naruto and Gungrave, and the quality is actually pretty good, yes (depends on the individual file). XBMC will play damn near any audio or video file you throw at it, and does a great job with both. I don't even listen to cd's anymore, I stream all my mp3s from my pc to my xbox and it's like having one bigass jukebox, hooked up right there to my home theater. All while using the Xbox dvd remote.
Not to mention, all the 16 bit emus that I play in glorious 1080i and look awesome whether using the advancemame filter or the lovely virgin pixels. It's convenient as hell, and I'm not about to hook up a pc to my tv anytime soon (and it would probably be via lowly svideo at that) cause if I get a second pc, it's going in the office for the wife.
And then of course there's the actual xbox games that you can play right off the HDD, which is again, extremely convenient.
And setting it all up isn't that hard, in most cases it's simply a matter of knowing how to edit a .ini or .xml file, which monkeys could do really.